I had an interesting discussion today with a colleague on the plight of the financial services industry. He was of the opinion, and we were talking about retail consumer finance, that the market was mature and as a result, there wasn’t much opportunity for new growth.

“How many more credit cards do people really need?” he asked. And if the latest figures on household debt are any indication, he is absolutely right.

However, the conversation then segued, (and not in an Anna Coren way) to the issue of where growth would come from in a mature market, like the credit card market.

What could a provider do? Offer a lower rate? Hardly. Provide longer terms? Possible, but costly. And then of course, if you run the credit check over the people who apply for this new card, how many get approved. Virtually none, because they can’t afford any more debt anyway.

So where does growth come from in a mature market like this? Well, we are not too sure either, but if our experience in another market is any indication, there is opportunity. It’s just that the existing players aren’t using the right approach to find it.

We worked on a project a little while ago that looked at the utilities market. The client wanted to gain an understanding of whether there where any opportunities in the residential utilities market prior to making what would be a substantial investment. Would it really be worthwhile? The acid test I suppose you could say of innovation and growth.

Now we started the project with a hypothesis that the utility market, of all markets, was mature, with low consumer interest and involvement and low pricing. People simply didn’t care. As a result, we didn’t believe there would be many opportunities at all.

How wrong we were. Halfway through the project the context changed. Climate change went from page 30 to page 1, the full impact of the drought kicked in and water restrictions were put in place on a permanent basis.

But the underlying conclusion was that despite a change in context, there was ample opportunity for value creation, not because of a change in context, but because the market was mature. People had simply been getting the same thing, for a very long time. They didn’t know what else was possible, so hence the low ‘care factor’ that typifies a mature market.

But here is our take on what this meant. Sure the market was mature, but in a very particular way. The business models of the existing players were mature. They hadn’t essentially changed in over 40 years.

So, when we look at a market and say its mature, what are we really seeing? A customer who is fully satisfied, or existing players who are fully satiated.

Michael R Johnson